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Oil capex cools

U.S. oil and gas companies took their collective foot off the accelerator in 2018 in terms of capital expenditures. The companies spent about $7.4 billion in 2018 on a cap-weighted average basis, about half of what they spent five years earlier.

Much of the motivation to spend earlier in the decade was driven by the shale boom, which led U.S. production to about 11.7 million barrels per day at the end of 2018 from 7 million at the end of 2012. Over that period, the price of a barrel of West Texas Intermediate crude oil has varied widely, averaging just less than $100 per barrel in 2013 before a 2015 collapse brought that average to near $40.

Recent declines in capital expenditures could be the results of lower oil prices, and accompanying lower profits, or higher volatility, which makes those profits less certain. But declines could also be a product of a cycle that saw a temporary massive build up in capacity.